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The Senate has rejected the House bill, and the government will shut down at midnight if the House doesn’t submit a “clean” bill with ObamaCare issues removed. The current thinking is that is unlikely. What is more likely is a day or week extension to allow time for more negotiating (as if any has really taken place). How will the market react?

You know by now that the Fed last week opted not to begin tapering its quantitative easing (i.e., buying of Treasuries and mortgage-backed securities), primarily for two reasons, I believe. First, rapidly rising long-term interest rates were already starting to hurt the recovering housing market (and the resulting wealth effect).

Today, with no new economic data, the market struggled through its third consecutively negative day of trading after a six-day winning streak. What’s the difference? We have traded a dubious, yet serious, problem in Syria for a much more tangible, and perhaps less solvable battle, among Congress.

“You must live in the present, launch yourself on every wave, find your eternity in each moment. -- Henry David Thoreau

Well, that party didn’t last long, and the hangover was on the nasty side.

Wall Street had a few days to entertain a little early-week exuberance as a couple of Fed-centric news cycles spurred the equity market towards yet another round of record highs. That exuberance, however, was severely “tapered” when a conflicting message from another Fed officer sent the market reeling towards steep losses, cutting into its midweek gains.

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Did you buy a market index call option in advance of the FOMC announcement on Wednesday? Maybe a straddle? Or did you at least hold pat on long positions knowing that you held an implicit “Fed put” against any meaningful downside? It seems like many investors did one of these, as markets have been strong in advance of today’s announcement.

Monday was yet another up-day for the S&P 500 Index as it reached 1704.95, narrowly missing its all-time high of 1709.67 set in August, but the index closed at 1697.60, up +0.57%. The Dow was also up, +0.77%, but the Nasdaq fell -0.12%

The day’s strength was chiefly attributed to a combination of Larry Summers stepping aside as the likely nominee for the new Fed chief and the signing of the agreement between Russia and the US on a method to require Syria to turn over its chemical weapons to the international control. Summers had been under fierce opposition even from Democrats, after being favored by President Obama.

Back towards the beginning of July, the Dow Jones Industrial Average (DJIA) was up 13.8% for the year, and the S&P 500 Index (SPX) followed pretty close behind, coming in around 13% over that same time frame. Even though Wall Street had just experienced a sharp fall-off towards the end of June, the market proved resilient, and the year’s second uptrend began to take shape shortly after July 4.

From a global perspective, however, the US equity market seemed to be largely the exception to the rule, as many of the world’s leading markets underperformed, at least in relationship to the US markets. Firmly ensconced in the category of underperformance was the China equity market. As it turned out, the moment proved to be somewhat less a harbinger of a worsening economy than an opportunity to buy the dip.

Needless to say, the news headlines have been dominated by the ongoing saga of President Obama posturing against Syrian dictator Assad and his chemical weapons arsenal. Who’d have thought that Russia would emerge as the cool head in the mix? They must be basking in the limelight -- an unfamiliar role for them.

We’re off to a good start to a new week after last week’s good finish. The domestic markets are up more than 1% midday, based on a possibility of compromise in Syria. Rumors have it that Russia has suggested that Syria place its chemical weapons under international control to avoid missile strikes. Further rumor is that Syria welcomed the proposal.

Too good to be true? Perhaps but does seem like a practical way out of the mess for everyone. At least a possible beginning.

Wall Street seems to be in a bit of a holding pattern, not quite sure which way to go as it ponders how to respond to the possibility of another war, a domestic economy that seems to sputter out with regularity, and the inevitability of a tapering off of the massive bond-buying program that has goosed the equity market to record highs.

Stocks have shown some resiliency this week as they have made an attempt to recover from last week’s weakness, which was primarily due to the imminent threat of a US strike on Syria. Also, the senior portfolio managers are returning to the fold after taking some time off in late August, and they are likely seeing more opportunities than threats at the moment.

Today’s major indices ended in the black, and we believe the market is more likely to continue to go up than down over the remainder of the year. That said, the market is being buffeted by a number of strong headwinds.

The Syrian crisis tops the list, with the expected outcome changing almost hourly. Surprises have been frequent. The British decided against involvement. President Obama decided to go to Congress. Congress is waffling as usual, but Obama is getting a little more support than initially expected.

Back at the beginning of August, the Chicago Board Options Exchange Market Volatility Index (VIX) was hanging around its low point for the year, ending the week at just a shade below 12. But the worm seems to have turned these past four weeks as the VIX, inevitably referred to as the “fear index,” has climbed over 40% since then.